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OFT restricts use of insurance tool

Credit reference tool could lead to illegal price 'co-ordination'

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Competition watchdog the Office of Fair Trading (OFT) has reached agreement for limiting the use of a tool produced by credit reference company Experian over fears that it could lead to illegal price co-ordination.

Seven insurers and two IT companies have agreed to limit the information they share and the OFT has warned that the use of the tool could have even wider implications in the insurance industry.

An OFT statement said that it had carried out an investigation "which identified an increased risk of price coordination among motor insurers using a specialist market analysis tool by Experian called Whatif? Private Motor".

OFT said: "The tool allowed insurers to access not only the pricing information they themselves provided to brokers but also pricing information supplied by other competing insurers," said the statement. "The OFT warned the firms that the information exchanged through WhatIf? Private Motor raised competition law concerns."

The competition watchdog said that the monthly updates about prices charged for insuring certain people in certain vehicles with certain insurers could theoretically have been achieved by receiving individual quotes, but that because of the amount of data involved this would have been "almost impossible".

"The nine companies under investigation are proposing to address the OFT's concerns by giving formal commitments that will result in the insurers no longer being able to access each other's individual pricing information through Whatif? Private Motor," said the OFT statement. "Instead, they propose to exchange pricing information through the analysis tool only if that information meets certain principles agreed with the OFT. These would require the pricing information to be anonymised, aggregated across at least five insurers and already 'live' in broker-sold policies."

The OFT said that though it hopes to resolve formally the issue with the nine companies involved soon, use of the product could even now be causing more widespread problems.

"The OFT limited the scope of its investigation to a small number of parties with a view to achieving a swift and effective outcome," its statement said. "However, the investigation potentially has wider implications as the Experian tool is just one of a number of similar products used throughout the insurance industry."

The competition watchdog said: "Active competition between firms drives better value for consumers and growth for the economy, and anything that potentially dampens that is a cause for concern," said OFT executive director Clive Maxwell. "The OFT treats possible breaches of competition law very seriously, but we believe that formal commitments in this case would be a proportionate way of resolving our concerns.

"We are aware that similar market analysis tools exist both in motor and other insurance markets and we urge companies using them to ensure that they are complying with competition law," OFT said.

Copyright © 2010, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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